2008 Council Hcmc Ifa Summary[1]

8/22/2019 2008 Council Hcmc Ifa Summary[1]

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F

ertilizer is a world market commodity, which means that supply

and demand factors in major markets around the world impact the

price U.S. farmers pay for fertilizer. Average prices paid by U.S.farmers for the major fertilizer nutrients reached the highest level on record

in September 2008 according to the U.S. Department of Agriculture.

Increased global demand for fertilizer has played a large part in placing

upward pressure on fertilizer prices. Overall, world nitrogen demand grew

by 17 percent, phosphate demand grew by 18 percent and potash demand

grew by 23 percent from fiscal year 2000/2001 to 2006/2007. China, India

and Brazil are the three largest contributors to the growth in world nutrient

demand.

The quest for healthier lives and better diets in developing countries isthe primary driving factor behind the increased global demand for fertilizer.

People in China, India and Brazil are seeking more food—requiring more

nutrients to replenish the soil.

SUPPLY & DEMAND, ENERGY DRIVE

GLOBAL FERTILIZER PRICES

& Fertilizer is a world market commodity necessary for the production of

food, feed, fuel fiber.NITROGEN (N)

is a primary building block for all

organisms. It is essential to making

proteins, helps keep plants green

and is a critical component of soil

structure.

PHOSPHORUS (P)

is found in every living cell. Phosphorus

is a component of DNA and it also plays vital roles in capturing light

during photosynthesis, helping with

seed germination, and helping plants

use water efficiently. Plants also use

phosphorus to help fight external stress

and prevent disease.

POTASSIUM (K )

is essential to the workings of every living

cell. It plays an important role in plant’s

water utilization and also helps regulate

the rate of photosynthesis. Other aspects

of plant health influenced by potassium

include the growth of strong stalks,

protection from extreme temperatures,

and the ability to fight stress and pests

such as weeds and insects.

The Fertilizer Institute

Nourish, Replenish, Grow

comes from the air

comes from ancient sea life

comes from evaporated oceans

world fertilizer demand impacts u.s. market

FERTILIZER

SUPPLY

&

DEMAND

world fertilizer demand has grown by 18 percent—larger than the u.s. market—

27 million nutrient tons.

Demand h 17 percent

Demand h 18 percent

Demand h 23 percent



GLOBAL DEMAND FOR FERTILIZER HAS PLACED UPWARD PRESSURE ON FERTILIZER

PRICES.

THE U.S. ETHANOL BOOM DROVE FERTILIZER DEMAND HIGHER, THEREFORE PLACING

UPWARD PRESSURE ON FERTILIZER PRICES.

INCREASED TRANSPORTATION COSTS TO MOVE FERTILIZER PRODUCTS INCREASED

DELIVERED FERTILIZER PRICES; SHIPPING AND DISTRIBUTION COSTS INCLUDING OCEAN

FREIGHT RATES AND DIESEL FUEL PRICES HAVE DECLINED SINCE MID 2008.

THE VALUE OF THE U.S. DOLLAR HAS FALLEN SIGNIFICANTLY SINCE THE BEGINNING OF

2002, INCREASING THE COST OF GOODS IMPORTED – INCLUDING FERTILIZER; WHILE

STILL DOWN SIGNIFICANTLY, THE VALUE OF THE DOLLAR HAS STRENGTHENED.

While world nutrient demand has risen

significantly since fiscal year 2001, U.S.

nutrient demand remained relatively flat,

ranging from 20.7 to 23.4 million nutrient tons. Then

came the ethanol boom. Ethanol production in the

U.S. has increased rapidly over the past several years,

from less than 3 billion gallons in 2003 to over 9 billion

gallons in 2008. According to the U.S. Department of

Agriculture, U.S. ethanol production could reach 11

billion gallons in 2011. Farmers responded to higher

corn prices resulting from the increase in demand by planting more corn acres.

Farmers planted 93.5 and 86 million acres of corn in

2007 and 2008, respectively, and intend to plant 85

million acres in 2009 – the 3 largest planted areas since

1944. The average corn price received by farmers stood

at $2.28 per bushel in 2006, $3.39 in 2007 and $4.78 in

2008 – the highest annual average on record.

Changes in U.S. nutrient use are driven by two

factors: changes in crop acres planted and changes in

application rates. Strong international demand coupled

with increased domestic demand placed upwardpressure on fertilizer prices.

U.S. Ethanol Production is Increasing Domestic Fertilizer Demand.

corn, wheat, soybeans and cotton account for 70 percent of total u.s.nutrient use, while corn alone accounts for close to 50 percent.

SUPPLY

&

DEMANDFACTORS

Ethanol Demand Drives Corn Cropcorn for ethanol total domestic corn use

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/080

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B i l l i o n B u s h e l s

2008/09



U.S. farmers must compete with farmers from

around the world for nitrogen, phosphate potash.

&

The United States is the largest importer of

nitrogen (over 50 percent of supply) and potash

(about 85 percent of supply) and the largest

exporter of phosphate.

Natural gas is the feedstock for producing ammonia,

which is the building block for all nitrogen fertilizers.

The cost of natural gas accounts for 70 to 90 percent

of the production cost of ammonia. Thus, with U.S.

natural gas prices increasing significantly since 2000,

average U.S. ammonia production costs rose by 172

percent from fiscal year 1999 to fiscal year 2005.

While Fertilizer prices have risen, many U.S. producers

were faced with negative margins due to the severe

escalation in production costs. High natural gas prices

have caused 26 U.S. ammonia plants to close since

fiscal year 1999.

As a result of ammonia plant closures, U.S. ammonia

production fell by more than 42 percent since fiscal year

1999. Consequently, the U.S. fertilizer industry, which

typically provided 75 percent of total U.S. nitrogen

supplies from domestic production during the 1990’s,

now relies on nitrogen imports for more than half of

our supply.

This situation also impacted phosphate fertilizer

production, as U.S. production costs for ammonium

phosphates increased significantly with energy and

raw material (phosphate rock, sulfur, and ammonia)

costs. More recently, energy costs and the prices of raw

materials have declined from 2008 levels.

After years of relative stability, North American potash

prices increased significantly beginning in mid-July

2003. The bulk of the price increase realized has

resulted from the 23 percent growth in global potash

demand since fiscal year 2001.

U.S. Nitrogen Production Decreases and Imports Rise

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

0

2

4

6

8

10

12

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16

1991/92 1993/94 1995/96 1997/98 1999/00 2001/02 2003/04 2005/06 2007/08

Ammonia Product ion Nitrogen Imports Imports as share of Tota l ( right scale)

SOURCE: COMPUTED BY THE FERTILIZER INSTITUTE FROM DATA REPORTED BY U.S. DEPARTMENT OF COMMERCE

M i l l i o n S

h o r t T o n s N

I m p o r t s a s S

h a r e o f T o t a l



IN THE UNITED STATES, WHAT ARE THE TOP

THREE FERTILIZER-UTILIZING CROPS?

Corn, wheat and soybeans.

HOW MUCH FERTILIZER DOES IT TAKE

TO PRODUCE A BUSHEL OF CORN, WHEAT ORSOYBEANS?

Depending on the type of cropping system used,

corn: 1.5 to 2 pounds of fertilizer nutrients.

wheat: 2.5 to 3.5 pounds of fertilizer nutrients.

soybeans: 1.0 to 1.5 pounds of fertilizer nutrients.

WHY IS FERTILIZER IMPORTANT

TO AGRICULTURE PRODUCTION?

Humans, animals and plants rely on a safe, healthy supply

of food and nutrients like nitrogen (N), phosphorus (P) and

potassium (K) for proper growth and development. Fertilizeris the ‘food’ that plants – from corn and wheat to pumpkins

and apples – need to produce a healthy and bountiful crop.

All crops require nutrients in one form or another.

WHAT ARE THE TOP THREE FERTILIZER-

CONSUMING COUNTRIES IN THE WORLD?

China, India and the United States, respectively.

WHAT HAS HAPPENED TO DOMESTIC NITROGEN

PRODUCTION?

High natural gas prices have caused 26 U.S. ammonia

plants to close since fiscal year 1999. As a result, U.S.

ammonia production fell by 6.2 million tons of nitrogen or

by over 42 percent from fiscal year 1999 to fiscal year 2006.

Consequently, the U.S. fertilizer industry which typically

supplied 75 percent of total U.S. nitrogen supplies from

domestic production during the 1990s, now relies on net

nitrogen imports for half of new nitrogen supplies.

WHY HAVE CORN ACRES INCREASED SO

DRAMATICALLY?

In 2006, 78.3 million acres of corn were planted in the

United States. In 2007, corn acres planted rose to 93.5

million acres. The U.S. Department of Agriculture (USDA)

reported that domestic ethanol production accounted for 24

percent of total corn demand in 2007/08. USDA projects

that ethanol production will account for 33 percent of total

corn use in 2009/10. For the first time, corn used in ethanol

exceeded the amount of corn the United States exported.

At the same time, the U.S. livestock industry is concerned

about rising feed prices and reduced profitability, which are

resulting from high corn demand. Increased acreages of corn

will have to be planted in the United States in upcoming years in order to meet the demands of the rapidly expanding

renewable fuels industry.

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TFI SERVES TO PROMOTE AND PROTECT THE FERTILIZER INDUSTRY, REPRESENTING THE PUBLIC POLICY, COMMUNICATION AND

STATISTICAL NEEDS OF PRODUCERS, IMPORTERS, WHOLESALERS AND RETAILERS OF FERTILIZER, AS WELL AS THOSE COMPANIES

THAT PROVIDE VITAL SERVICES TO THE FERTILIZER INDUSTRY.

820 First Street, N.E., Suite 430 | Washington, D.C. 20002 | TEL (202) 962-0490 | FAX (202) 962-0577 | www.tfi.orgThe Fertilizer Institute

Nourish, Replenish, Grow

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2008 Council Hcmc Ifa Summary[1]